SanDisk 2014 Annual Report Download - page 186

SANDISK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The entities within Flash Ventures purchase wafers from Toshiba at cost and then resell those wafers to the
Company and Toshiba at cost plus a markup. The Company accounts for its ownership position in each
Flash Ventures entity under the equity method of accounting. The Company is committed to purchase its
provided three-month forecast of Flash Ventures’ NAND wafer supply, which generally equals 50% of
Flash Ventures’ output. The Company is not able to estimate its total wafer purchase commitment
obligation beyond its rolling three-month purchase commitment because the price is determined by
reference to the future cost of producing the semiconductor wafers. In addition, the Company is
committed to fund 49.9% to 50% of Flash Ventures’ costs to the extent that Flash Ventures’ revenue from
wafer sales to the Company and Toshiba are insufficient to cover these costs.
Flash Partners. Flash Partners Ltd. (‘‘Flash Partners’’) was formed in fiscal year 2004. NAND flash
memory products provided to the Company by this venture are manufactured by Toshiba primarily at its
300-millimeter wafer fabrication facility (‘‘Fab 3’’) located in Yokkaichi, Japan. As of December 28, 2014,
the Company had notes receivable from Flash Partners of $12.5 million, denominated in Japanese yen.
These notes are secured by the equipment purchased by Flash Partners with the note proceeds. The
Company also has guarantee obligations to Flash Partners; see ‘‘Off-Balance Sheet Liabilities.’’ As of
December 28, 2014 and December 29, 2013, the Company had an equity investment in Flash Partners of
$167.1 million and $190.7 million, respectively, denominated in Japanese yen, adjusted by ($7.3) million
and $17.3 million, respectively, of cumulative translation adjustments recorded in AOCI. The Company
records basis adjustments to its equity in earnings from Flash Partners that relate to the difference between
the basis in the Company’s equity investment compared to the historical basis of the assets recorded by
Flash Partners. In the fiscal year ended December 28, 2014, the Company recorded no basis adjustments to
its equity in earnings from Flash Partners. In the fiscal years ended December 29, 2013 and December 30,
2012, the Company recorded a basis adjustment of $1.2 million and $3.0 million, respectively, to its equity
earnings from Flash Partners. Flash Partners’ share of the Fab 3 fabrication facility is fully equipped.
Flash Alliance. Flash Alliance Ltd. (‘‘Flash Alliance’’) was formed in fiscal year 2006. NAND flash
memory products provided to the Company by this venture are manufactured by Toshiba primarily at its
300-millimeter wafer fabrication facility (‘‘Fab 4’’) located in Yokkaichi, Japan. As of December 28, 2014,
the Company had notes receivable from Flash Alliance of $292.7 million, denominated in Japanese yen.
These notes are secured by the equipment purchased by Flash Alliance with the note proceeds. The
Company also has guarantee obligations to Flash Alliance; see ‘‘Off-Balance Sheet Liabilities.’’ As of
December 28, 2014 and December 29, 2013, the Company had an equity investment in Flash Alliance of
$249.5 million and $284.0 million, respectively, denominated in Japanese yen, adjusted by ($45.5) million
and ($8.7) million, respectively, of cumulative translation adjustments recorded in AOCI. The Company
records basis adjustments to its equity in earnings from Flash Alliance that relate to the difference between
the basis in the Company’s equity investment compared to the historical basis of the assets recorded by
Flash Alliance. In the fiscal year ended December 28, 2014, the Company recorded no basis adjustments to
its equity in earnings from Flash Alliance. In the fiscal years ended December 29, 2013 and December 30,
2012, the Company recorded a basis adjustment of $6.5 million and $15.2 million, respectively, to its equity
earnings from Flash Alliance. Flash Alliance’s share of the Fab 4 fabrication facility is fully equipped.
Flash Forward. Flash Forward Ltd. (‘‘Flash Forward’’) was formed in fiscal year 2010. NAND flash
memory products provided to the Company by this venture are manufactured by Toshiba primarily at its
300-millimeter wafer fabrication facility (‘‘Fab 5’’) located in Yokkaichi, Japan. Fab 5 was built in two
phases. Phase 1 of the building is fully equipped. The Phase 2 shell of Fab 5 is complete and has been
partially equipped. The Phase 2 shell is currently intended to be used primarily for technology transition of
the existing Flash Ventures wafer capacity to 1Y-nanometer and 15-nanometer technology nodes, the
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